A former community discussing the business of software, from the smallest shareware operation to Microsoft. A part of Joel on Software.
We're closed, folks!
Doug Nebeker ("Doug")
My next app is nearing completion and it has potential for companies to want to use it, as well home users. Companies would be subject to a yearly fee, whereas home users pay once only.
How does one know the right price to sell to a company? If I set a blanket fee of $1000/year, then that's affordable for small businesses, but then someone like Google (just an example) pays that without a second glance - it's not even a drop in the well. Should I be charging bigger companies more? I'm sure I read an article in these forums, or maybe Andy's site, that mentioned tiered pricing based on the company?
Any thoughts appreciated.
The simplest way to do this is to sell seats. So if 1,000 people will be using it, it will cost more than if 250 people are using it.
Tuesday, February 10, 2015
From a business pricing perspective, you may also want to consider their opportunity cost when determining your price.
That is, what's it going to cost them to continue doing "it" the old way, a cost that your software will alleviate. If you software saves 'X' hours of work per annum and each hour costs 'Y', then that's may be your price point comparison. Also, the size of the pain/cost business currently incur and what substitutes exist. Substitutes may not necessarily be technical.
Also, you haven't given any detail regarding the software's implementation and use.
End User/Desktop software often gets priced per seat as Andrew mentioned.
If your software runs as a service (such as on Windows Server or Exchange) some vendors charge per server or even per processor.
Other vendors who supply industry data, charge for data volumes used rather than a set fee.
All the best -
It's wrong to assume a large company will just pay $1000. You need to work out what level you are selling to and how much sales effort that requires.
Are you selling a tool that helps a mid-level manager do his job? In this case keeping your price point below his spending limit for his expense account makes it much easier. This is where we sell. Keeping the price below $500 in our sector means decisions can just be made and don't need sign off by a director.
For us to sell at a higher price than this would require the purchase to be approved by a director or 'C' level executive. This typically requires a sales person to help drive the sale and get everyone on board from the initial contact, the decision maker, the check signer and legal.
With this extra effort, you typically need a much higher price just to cover your costs for the sale process. This is reflected in our industry. Software is either less than $500 and treated as a tool for individuals or more than $10000 and is an enterprise level purchase .
I work for a huge company, and rank-and-file people like me view it as more-or-less impossible to get approval for anything. Price has nothing to do with it.
Literally, if I want some third-party software product, I either (a) do without, (b) write it myself (possibly at 100x the cost and 1/100th the quality of the off-the-shelf product), or (c) pay for it out of my own pocket.
I often find myself confused and/or put off by commercial license restrictions. Let's say I buy a photo editing application with a home use restriction and use it to handle family photos. One day though I put a vacation photo on my work blog. Oh no! Now I am in violation of the license!
Another situation is people who are doing small business or casual use. So someone is an amateur photographer but someone asks if they can run his photo of a news event in the Milwaukee Sentinel, and they end up paying him a $10 fee. Oops. Now he is a commercial photographer.
One solution that addresses some of this is to base it on the amount made.
For example, have a "discounted license" for both "personal users" and people using commercially but "the yearly gross revenue of the business does not exceed $15,000".
This prevents killing off customers who are using it to prep photos for their side hobby of ebay sales.
What Adrian said, plus
I don't think a big company is going to pay more because they are a big company. In fact, they will have professional bean counters/purchasers whose job is to get the absolute best price. This is another reason why you probably need a salesperson to drive the sale.
In some regards they might pay more: they're going to be looking for more support, branding/customisation and features like the ability to integrate your product in a disk image for easy rollout - so if your licence manager needs some special phone home to complete installation you had better take care of that.
The app is used to monitor certain PC activity for the user's benefit, stuff they will be interested in; and when I mentioned it to my son's teacher at school, she said she's "gotta have that" (her words!) on her PC in the classroom, and that the other teachers would love it, too.
So I'm thinking there'd have be some sort of price for non-private home user situation. And I know schools never like to pay much either, but this isn't just limited to schools: I'd be approaching any business/company that it potentially relates to.
Cost just becomes the issue. Do I have one blanket price per company, say $1000/year for this school? Or per teacher? Hard to say.
Per seat or per PC is the easiest way for everyone.
There's no reason any company should have to prove to you how much money they make. Likewise if only one employee will ever use the software why should they pay more than a small company with everyone using it?
Per seat automatically scales up if needed, gives the customer a degree of control how much they spend, justifies that extra spend and is relatively easy for you to enforce.
The only real downside is resentment at being squeezed more just because they're a bigger company, but as that's exactly what you're trying to do I don't see how you can avoid that aspect.
Tuesday, February 10, 2015
We've been offering discounts to (very) small companies since 2008, and are yet to receive a single complaint from a large company.
There is a caveat though: our product is a software development tool, but not something that all developers working on a project would use, e.g. an IDE. It is more like a build/packaging tool, so one or two licenses are often enough for the entire group. As a result, price _per developer_ was way higher for early stage startups and indies compared to enterprises before we introduced that discount program.
Wednesday, February 11, 2015
Licensing. Gulp.... Guess what comes next...
Wednesday, February 11, 2015
This topic is archived. No further replies will be accepted.Other recent topics
Powered by FogBugz